LAKELAND FINANCIAL CORP [LKFN] Filings

10-Q 1 lkfn-20240630.htm 10-Q lkfn-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 0-11487

LAKELAND FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Indiana			35-1559596
(State or Other Jurisdiction			(IRS Employer
of Incorporation or Organization)			Identification No.)

202 East Center Street,
Warsaw	,	Indiana	46580
(Address of principal executive offices)			(Zip Code)

(574) 267‑6144

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, No par value

LKFN

The NASDAQ Stock Market LLC

(Nasdaq Global Select Market)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b–2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock outstanding at July 31, 2024: 25,507,451

Table of Contents

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets — June 30, 2024 and December 31, 2023	1
	Consolidated Statements of Income — three and six months ended June 30, 2024 and 2023	2
	Consolidated Statements of Comprehensive Income — three and six months ended June 30, 2024 and 2023	3
	Consolidated Statements of Changes in Stockholders’ Equity — three and six months ended June 30, 2024 and 2023	4
	Consolidated Statements of Cash Flows — six months ended June 30, 2024 and 2023	6
	Notes to the Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	56
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	58
SIGNATURES		59

Table of Contents

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share data)


	June 30, 2024		December 31, 2023
	(Unaudited)
ASSETS
Cash and due from banks	$	60,887	$	70,451
Short-term investments	60,290		81,373
Total cash and cash equivalents	121,177		151,824

Securities available-for-sale, at fair value	993,057		1,051,728
Securities held-to-maturity, at amortized cost (fair value of $113,997 and $119,215, respectively)	130,746		129,918
Real estate mortgage loans held-for-sale	399		1,158
Loans, net of allowance for credit losses of $80,711 and $71,972	4,971,630		4,844,562
Land, premises and equipment, net	58,793		57,899
Bank owned life insurance	110,985		109,114
Federal Reserve and Federal Home Loan Bank stock	21,420		21,420
Accrued interest receivable	30,681		30,011
Goodwill	4,970		4,970
Other assets	124,949		121,425
Total assets	$	6,568,807	$	6,524,029


LIABILITIES
Noninterest bearing deposits	$	1,212,989	$	1,353,477
Interest bearing deposits	4,550,548		4,367,048
Total deposits	5,763,537		5,720,525

Federal Funds purchased	55,000		0
Federal Home Loan Bank advances	0		50,000
Total borrowings	55,000		50,000

Accrued interest payable	15,354		20,893
Other liabilities	80,326		82,818
Total liabilities	5,914,217		5,874,236

STOCKHOLDERS’ EQUITY
Common stock: 90,000,000 shares authorized, no par value
25,968,167 shares issued and 25,503,744 outstanding as of June 30, 2024
25,903,686 shares issued and 25,430,566 outstanding as of December 31, 2023	126,871		127,692
Retained earnings	713,541		692,760
Accumulated other comprehensive income (loss)	(170,458)		(155,195)
Treasury stock at cost (464,423 shares as of June 30, 2024, 473,120 shares as of December 31, 2023)	(15,453)		(15,553)
Total stockholders’ equity	654,501		649,704
Noncontrolling interest	89		89
Total equity	654,590		649,793
Total liabilities and equity	$	6,568,807	$	6,524,029

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME (unaudited - dollars in thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
NET INTEREST INCOME
Interest and fees on loans
Taxable	$	84,226	$	75,047	$	166,268	$	144,589
Tax exempt	632		960		1,532		1,861
Interest and dividends on securities
Taxable	3,104		3,376		6,143		6,889
Tax exempt	3,932		4,064		7,879		8,364
Other interest income	1,842		1,035		2,948		1,999
Total interest income	93,736		84,482		184,770		163,702

Interest on deposits	44,363		33,611		85,527		58,529

Interest on short-term borrowings	1,077		2,347		3,531		5,130

Total interest expense	45,440		35,958		89,058		63,659

NET INTEREST INCOME	48,296		48,524		95,712		100,043

Provision for credit losses	8,480		800		10,000		5,150

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	39,816		47,724		85,712		94,893

NONINTEREST INCOME
Wealth advisory fees	2,597		2,271		5,052		4,471
Investment brokerage fees	478		428		1,000		962
Service charges on deposit accounts	2,806		2,726		5,497		5,356
Loan and service fees	3,048		3,002		5,900		5,848
Merchant and interchange fee income	892		929		1,755		1,806
Bank owned life insurance income	890		693		1,926		1,384
Interest rate swap fee income	0		794		0		794
Mortgage banking income (loss)	23		(35)		75		(134)
Net securities gains (losses)	0		3		(46)		19
Net gain on Visa shares	9,011		0		9,011		0
Other income	694		690		2,881		1,309
Total noninterest income	20,439		11,501		33,051		21,815

NONINTEREST EXPENSE
Salaries and employee benefits	16,158		11,374		32,991		27,437
Net occupancy expense	1,698		1,681		3,438		3,253
Equipment costs	1,343		1,426		2,755		2,864
Data processing fees and supplies	3,812		3,474		7,651		6,926
Corporate and business development	1,265		1,298		2,646		2,729
FDIC insurance and other regulatory fees	816		803		1,605		1,598
Professional fees	2,123		2,049		4,586		4,170
Wire fraud loss	0		18,058		0		18,058
Other expense	6,118		2,571		8,366		5,133
Total noninterest expense	33,333		42,734		64,038		72,168

INCOME BEFORE INCOME TAX EXPENSE	26,922		16,491		54,725		44,540
Income tax expense	4,373		1,880		8,775		5,651
NET INCOME	$	22,549	$	14,611	$	45,950	$	38,889

BASIC WEIGHTED AVERAGE COMMON SHARES	25,678,231		25,607,663		25,667,647		25,595,412

BASIC EARNINGS PER COMMON SHARE	$	0.88	$	0.57	$	1.79	$	1.52

DILUTED WEIGHTED AVERAGE COMMON SHARES	25,742,871		25,686,354		25,746,773		25,696,370

DILUTED EARNINGS PER COMMON SHARE	$	0.87	$	0.57	$	1.78	$	1.51

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited - dollars in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	22,549	$	14,611	$	45,950	$	38,889
Other comprehensive income (loss)
Change in available-for-sale and transferred securities:
Unrealized holding gain (loss) on securities available-for-sale arising during the period	(4,991)		(13,511)		(20,380)		13,282
Reclassification adjust for amortization of unrealized losses on securities transferred to held-to-maturity	489		494		985		985
Reclassification adjustment for (gains) losses included in net income	0		(3)		46		(19)
Net securities gain (loss) activity during the period	(4,502)		(13,020)		(19,349)		14,248
Tax effect	945		2,734		4,063		(2,992)
Net of tax amount	(3,557)		(10,286)		(15,286)		11,256
Defined benefit pension plans:
Amortization of net actuarial loss	16		15		31		30
Net gain activity during the period	16		15		31		30
Tax effect	(4)		(4)		(8)		(8)
Net of tax amount	12		11		23		22
Total other comprehensive income (loss), net of tax	(3,545)		(10,275)		(15,263)		11,278
Comprehensive income	$	19,004	$	4,336	$	30,687	$	50,167

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited - dollars in thousands, except share and per share data)


	Three Months Ended
	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
	Shares	Stock

Balance at April 1, 2023	25,430,917	$	125,840	$	658,629	$	(167,370)	$	(15,182)	$	601,917	$	89	$	602,006

Comprehensive income:
Net income				14,611						14,611				14,611
Other comprehensive income (loss), net of tax						(10,275)				(10,275)				(10,275)
Cash dividends declared and paid, $0.46 per share				(11,793)						(11,793)				(11,793)
Treasury shares purchased under deferred directors' plan	(1,701)	81						(81)		0				0

Stock activity under equity compensation plans	0	0								0				0
Stock based compensation expense		(2,554)								(2,554)				(2,554)
Balance at June 30, 2023	25,429,216	$	123,367	$	661,447	$	(177,645)	$	(15,263)	$	591,906	$	89	$	591,995

Balance at April 1, 2024	25,503,425	$	125,873	$	703,330	$	(166,913)	$	(15,370)	$	646,920	$	89	$	647,009

Comprehensive income:
Net income				22,549						22,549				22,549
Other comprehensive income (loss), net of tax						(3,545)				(3,545)				(3,545)
Cash dividends declared and paid, $0.48 per share				(12,338)						(12,338)				(12,338)
Treasury shares purchased under deferred directors' plan	(1,348)	83						(83)		0				0

Stock activity under equity compensation plans	1,667	(80)								(80)				(80)
Stock based compensation expense		995								995				995
Balance at June 30, 2024	25,503,744	$	126,871	$	713,541	$	(170,458)	$	(15,453)	$	654,501	$	89	$	654,590

Table of Contents


	Six Months Ended
	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
	Shares	Stock

Balance at January 1, 2023	25,349,225	$	127,004	$	646,100	$	(188,923)	$	(15,383)	$	568,798	$	89	$	568,887

Comprehensive income:
Net income				38,889						38,889				38,889
Other comprehensive income (loss), net of tax						11,278				11,278				11,278
Cash dividends declared and paid, $0.92 per share				(23,542)						(23,542)				(23,542)
Treasury shares purchased under deferred directors' plan	(4,501)	285						(285)		0				0
Treasury shares sold and distributed under deferred directors' plan	12,855	(405)						405		0				0
Stock activity under equity compensation plans	71,637	(3,124)								(3,124)				(3,124)
Stock based compensation expense		(393)								(393)				(393)
Balance at June 30, 2023	25,429,216	$	123,367	$	661,447	$	(177,645)	$	(15,263)	$	591,906	$	89	$	591,995

Balance at January 1, 2024	25,430,566	$	127,692	$	692,760	$	(155,195)	$	(15,553)	$	649,704	$	89	$	649,793
Impact of adoption ASU 2023-02, net of tax				(532)						(532)				(532)
Adjusted Balance at January 1, 2024	25,430,566	127,692		692,228		(155,195)		(15,553)		649,172		89		649,261
Comprehensive income:
Net income				45,950						45,950				45,950
Other comprehensive income (loss), net of tax						(15,263)				(15,263)				(15,263)
Cash dividends declared and paid, $0.96 per share				(24,637)						(24,637)				(24,637)
Treasury shares purchased under deferred directors' plan	(4,578)	291						(291)		0				0
Treasury shares sold and distributed under deferred directors' plan	13,275	(391)						391		0				0
Stock activity under equity compensation plans	64,481	(2,596)								(2,596)				(2,596)
Stock based compensation expense		1,875								1,875				1,875
Balance at June 30, 2024	25,503,744	$	126,871	$	713,541	$	(170,458)	$	(15,453)	$	654,501	$	89	$	654,590

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited - in thousands)


Six Months Ended June 30,	2024		2023
Cash flows from operating activities:
Net income	$	45,950	$	38,889
Adjustments to reconcile net income to net cash from operating activities:
Depreciation	3,011		3,069
Provision for credit losses	10,000		5,150

Amortization of loan servicing rights	241		286

Loans originated for sale, including participations	(8,177)		(4,266)
Net gain on sales of loans	(253)		(127)
Proceeds from sale of loans, including participations	9,116		3,421
Net (gain) loss on Visa shares	(9,011)		0
Net (gain) loss on sales of premises and equipment	55		(1)
Net (gain) loss on sales and calls of securities available-for-sale	46		(19)
Net securities amortization	2,393		2,369
Stock based compensation expense	1,875		(393)
Losses (earnings) on life insurance	(1,926)		(1,384)
Gain on life insurance	(243)		0
Tax benefit of stock award issuances	(208)		(720)
Net change:
Interest receivable and other assets	3,786		(1,411)
Interest payable and other liabilities	(10,859)		(7,958)
Total adjustments	(154)		(1,984)
Net cash from operating activities	45,796		36,905

Cash flows from investing activities:
Proceeds from sale of securities available-for-sale	7,136		99,951
Proceeds from sale of Visa shares	7,358		0
Proceeds from maturities, calls and principal paydowns of securities available-for-sale	28,917		38,886
Proceeds from maturities, calls and principal paydowns of securities held-to-maturity	0		6
Purchases of securities available-for-sale	0		(4,314)
Purchase of life insurance	(241)		(191)
Net (increase) decrease in total loans	(137,068)		(157,846)
Proceeds from sales of land, premises and equipment	6		13
Purchases of land, premises and equipment	(3,966)		(3,823)
Purchase of Federal Home Loan Bank stock	0		(5,625)


Proceeds from life insurance	536		0
Net cash from investing activities	(97,322)		(32,943)

Cash flows from financing activities:
Net increase (decrease) in total deposits	43,012		(37,561)
Net increase (decrease) in short-term borrowings	55,000		(22,000)

Proceeds from short-term FHLB borrowings	0		125,000
Net payments on short-term FHLB borrowings	(50,000)		0
Common dividends paid	(24,624)		(23,529)
Preferred dividends paid	(13)		(13)
Payments related to equity incentive plans	(2,596)		(3,124)
Purchase of treasury stock	(291)		(285)
Sale of treasury stock	391		405
Net cash from financing activities	20,879		38,893
Net change in cash and cash equivalents	(30,647)		42,855
Cash and cash equivalents at beginning of the period	151,824		130,282
Cash and cash equivalents at end of the period	121,177		173,137
Cash paid during the period for:
Interest	$	94,597	57,011
Income taxes	11,680		7,125
Supplemental non-cash disclosures:
Loans transferred to other real estate owned	0		284

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

NOTE 1. BASIS OF PRESENTATION

This report is filed for Lakeland Financial Corporation (the "Company"), which has one wholly owned subsidiary, Lake City Bank (the "Bank"). Also included in this report are results for the Bank’s wholly owned subsidiary, LCB Investments II, Inc. ("LCB Investments"), which manages the Bank’s investment securities portfolio. LCB Investments owns LCB Funding, Inc. ("LCB Funding"), a real estate investment trust. All significant inter-company balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and are unaudited. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for any subsequent reporting periods, including the year ending December 31, 2024. The Company’s 2023 Annual Report on Form 10-K should be read in conjunction with these statements.

Adoption of New Accounting Standards

On March 28, 2023, the FASB issued ASU 2023-02, "Investments - Equity Method and Join Ventures (ASC 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method." ASU 2014-01, "Investments - Equity method and Joint Ventures (ASC 323): Accounting for Investments in Qualified Affordable Housing Projects", previously introduced the option to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met; however, this guidance limited the proportional amortization method to investments in low-income-housing tax credit (LIHTC) structures. The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of net income tax expense (benefit). Equity investments in other tax credit structures are typically accounted for using the equity method, which results in investment income, gains and losses, and tax credits being presented gross on the income statement in their respective line items.

The amendments in this update permit reporting entities to elect to account for certain tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax benefits in the income statement as a component of income tax expense (benefit). To qualify for the proportional amortization method, all of the following conditions must be met: (1) It is probable that the income tax credits allocated to the tax equity investor will be available; (2) The tax equity investor does not have the ability to exercise significant influence over the operating and financial policies of the underlying project; (3) Substantially all of the projected benefits are from income tax credits and other income tax benefits (projected benefits included income tax credits, other income tax benefits, and other non-income tax -related benefits and are determined on a discounted basis, using a discount rate that is consistent with the cash flow assumptions used by the tax equity investor in making its decision to invest in the project); (4) The tax equity investor's projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive; and (5) The tax equity investor is a limited liability investor in the limited liability entity for both legal and tax purposes, and the tax equity investor's liability is limited to its capital investment. An accounting policy election is allowed to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. The amendments in this update require specific disclosures that must be applied to all investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method. The amendments require that a reporting entity disclose certain information in annual and interim reporting periods that enable investors to understanding the following information about its investments that generate income tax credits and other income tax benefits from a tax credit program including: (1) The nature of its tax equity investments; and (2) The effect of its tax equity investments and related income tax credits and other income tax benefits on its financial position and results of operations.

For public business entities, the amendments in this update were effective for fiscal years beginning after December 31, 2023, including interim periods within those fiscal years. The amendments in this update must be applied on either a modified retrospective or a retrospective basis. The Company chose the modified retrospective approach and recorded a day one adjustment of ($532,000), net of tax, to beginning retained earnings on January 1, 2024, which did not have a material impact on the consolidated financial statements.

Newly Issued But Not Yet Effective Accounting Standards

On October 9, 2023, the FASB issued ASU 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative", which modified the disclosure or presentation requirements of a variety of Topics in the Codification and was intended to both clarify or improve such requirements and align the requirements with the SEC's regulations. The amendments to Topics of Codification provided in this update apply to all reporting entities within the scope of the affected Topics unless otherwise indicated by the update. Given the variety of Topics amended, a broad range of entities may be affected by one or more of the amendments provided in the update. The Company evaluated the amendments provided in the update and believes certain of the disclosure improvements are applicable to the Company's interim or annual disclosures. Subtopic 230-10, as amended, requires disclosure within the accounting policy in annual periods of where cash flows associated with derivative instruments and their related gains and losses are presented within the statement of cash flows. Subtopic 260-10, as amended, requires disclosure of the methods used in the diluted earnings-per-share computation for each dilutive security and clarifies that certain disclosures should be made during interim periods. Subtopic 470-10, as amended, requires disclosure of amounts and terms of unused lines of credit and unfunded commitments and the weighted-average interest rate on short-term borrowings outstanding as of the date of each balance sheet presented.

The effective date for each amendment for entities subject to the SEC's existing disclosure requirements is the effective date of the removal of the related disclosure from Regulation S-X or Regulation S-K, with early adoption prohibited. The amendments in the update are to be applied prospectively. The Company will apply prospectively the provisions provided in the amendments as such provisions become effective, and does not believe the application of these modified disclosure requirements will have a material impact on the consolidated financial statements. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment in the update will be removed from the Codification and will not become effective.

On November 27, 2023, the FASB issued ASU 2023-07, "Segment Reporting (ASC 280): Improvements to Reportable Segment Disclosures", intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Provisions in the amendment include: (1) Requirement that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss (collectively referred to as the "significant expense principle"); (2) Requirement that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition (the other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss); (3) Requirement that a public entity provide all annual disclosures about a reportable segment's profit or loss and assets currently required by ASC 280 in interim periods; (4) Clarification that if the CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocation resources, a public entity may report one or more of those additional measures of segment profit (at least one of the reported segment profit or loss measures, or the single reported measure if only one is disclosed, should be the measure that is the most consistent with the measurement principles used in measuring the corresponding amounts in the public entity's consolidated financial statements); (5) Requirement that a public entity disclose the title and position of the CODM and explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources; and (6) Requirement that a public entity that has a single reportable segment provide all the disclosures by the amendments in the update and all existing segment disclosures in ASC 280.

The amendments in the update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. For public business entities, amendments in the update should be applied retrospectively to all periods presented in the financial statements, and upon transition to the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company is currently evaluating the impact of this standard on its disclosures, however does not expect adoption of the update to have a material impact of the consolidated financial statements.

On December 13, 2023, the FASB issued ASU 2023-08, "Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets", to provide improved accounting and disclosure guidance for crypto assets. Stakeholders stated that current accounting guidance, except as provided in GAAP for certain specialized industries, surrounding crypto asset holdings as indefinite-lived intangible assets fails to provide financial statement users with decision-useful information. To remedy these shortcomings, the amendments in this update require an entity present (1) crypto assets measured at fair value separately from other intangible assets reported in the balance sheet and (2) changes from the remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the income

statement. While the amendments in the update do not otherwise change the presentation requirements for the statement of cash flows, they do require specific presentation of cash receipts arising from crypto assets that are received as noncash consideration in the ordinary course of business and are converted nearly immediately into cash.

The amendments in the update also provide for several enhancements related to disclosure of an entity's crypto asset holdings. For annual and interim reporting periods, the amendments in the update require an entity disclose the following information: (1) The name, cost basis, fair value, and number of units for each significant crypto asset holding and aggregate fair values and costs bases of the crypto asset holdings that are not individually significant; and (2) For crypto assets that are subject to contractual sale restrictions, the fair value of those crypto assets, the nature and remaining duration of the restriction(s), and the circumstances that could cause the restriction(s) to lapse. For annual reporting periods, the amendments in the update require an entity disclose the following information: (1) A rollforward, in the aggregate, of activity in the reporting period for crypto asset holdings, including additions (with a description of the activities that resulted in the additions), dispositions, gains, and losses; (2) For any dispositions for crypto assets in the reporting period, the difference between the disposal price and the cost basis and a description of the activities that resulted in the dispositions; (3) If gains and losses are not presented separately, the income statement line item in which those gains and losses are recognized; and (4) The method for determining the cost basis of crypto assets.

The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. The amendments in this update require a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets) as of the beginning of the annual reporting period in which an entity adopts the amendments. The Company is currently evaluating the impact of this update on its disclosures, however does not expect the adoption of this update to have a material impact on the consolidated financial statements based upon the nature of the Company's current operations.

On December 14, 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", to address investor requests for greater transparency in regards to income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments are designed to enhance transparency surrounding income tax disclosures by requiring (1) Consistent categories and greater disaggregation of information in the rate reconciliation; and (2) Income taxes paid disaggregation by taxing jurisdiction, which will allow investors to better assess, in their capital allocation decisions, how an entity's operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. Other amendments in this update are designed to improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (loss) and income tax expense (benefit) to be consistent with the SEC's Regulation S-X 210.4-08(h), Rules of General Application-General Notes to Financial Statements: Income Tax Expense; and (2) Removing disclosures that are no longer considered cost beneficial or relevant.

The amendments in this update are effective for public business entities for annual periods beginning after December 31, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis, however retrospective application is permitted. The Company is currently evaluating the impact of this update on its disclosures, however does not expect the adoption of this update to have a material impact on the consolidated financial statements.

Reclassification

Certain amounts appearing in the consolidated financial statements and notes thereto for prior periods have been reclassified to conform with the current presentation. The reclassifications had no effect on net income or stockholders' equity as previously reported.

Table of Contents

NOTE 2. SECURITIES

Debt securities purchased with the intent and ability to hold to their maturity are classified as held-to-maturity securities. All other investment securities are classified as available-for-sale securities.

Available-for-Sale Securities

Information related to the amortized cost, fair value and allowance for credit losses of securities available-for-sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) is provided in the table below.


(dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
June 30, 2024

U.S. government sponsored agencies	$	142,183	$	0	$	(28,486)	$	0	$	113,697
Mortgage-backed securities: residential	498,259		72		(79,101)		0		419,230

State and municipal securities	547,540		10		(87,420)		0		460,130
Total	$	1,187,982	$	82	$	(195,007)	$	0	$	993,057

December 31, 2023

U.S. government sponsored agencies	$	146,692	$	0	$	(27,213)	$	0	$	119,479
Mortgage-backed securities: residential	522,275		118		(74,551)		0		447,842

State and municipal securities	557,352		65		(73,010)		0		484,407
Total	$	1,226,319	$	183	$	(174,774)	$	0	$	1,051,728

Held-to-Maturity Securities

Information related to the amortized cost, fair value and allowance for credit losses of securities held-to-maturity and the related gross unrealized gains and losses is presented in the table below.


(dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
June 30, 2024
State and municipal securities	$	130,746	$	0	$	(16,749)	$	0	$	113,997

December 31, 2023
State and municipal securities	$	129,918	$	0	$	(10,703)	$	0	$	119,215

The Company has the current intent and ability to hold held-to-maturity securities until maturity. All of the Company's securities designated as held-to-maturity were transferred from the available-for-sale classification. The net unrealized gain or loss on the transferred securities was recorded as a component of accumulated other comprehensive income (loss) at the time of the transfer and is amortized over the remaining life of the underlying securities as an adjustment to the yield on those securities. The net amount of the unamortized unrealized loss on the transferred securities included in accumulated other comprehensive income (loss) was $19.9 million ($15.8 million, net of tax) at June 30, 2024.

Table of Contents

Information regarding the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by maturity as of June 30, 2024 is presented below. Maturity information is based on contractual maturity for all securities other than mortgage-backed securities. Actual maturities of securities may differ from contractual maturities because borrowers may have the right to prepay the obligation without a prepayment penalty.

Available-for-Sale

Held-to-Maturity

(dollars in thousands)

Amortized Cost

Fair
Value

Amortized Cost

Fair
Value

Due in one year or less

505